WASHINGTON — Mortgage rates jumped Tuesday after a stronger-than-expected inflation report, ending four consecutive weeks of declines that had helped revive demand for home loans, CNBC reported.
The average rate on a 30-year fixed-rate mortgage climbed 12 basis points from Monday to 7.30%, according to Mortgage News Daily. It was the largest one-day increase in more than a month.
The increase followed a consumer price index report showing widespread price pressures, adding to concerns raised by a stronger-than-expected employment report released Friday. The data heightened expectations that the Federal Reserve may need to keep monetary policy restrictive.
“Given that the Fed explicitly said it was more focused on the inflation component of its job description at the moment (as opposed to the ‘full employment’ component), we were expecting today’s data to carry far more weight than last week’s jobs report,” Matthew Graham, chief operating officer at Mortgage News Daily, wrote, according to CNBC.
Mortgage Apps Had Been on the Increase
Before Tuesday’s increase, lower borrowing costs had helped lift mortgage applications. Total applications rose 6.2% last week from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.
The MBA said its weekly average rate for a 30-year fixed-rate mortgage fell to 7.21% from 7.30% for loans with a 20% down payment. That marked the fourth consecutive weekly decline and the lowest level since mid-September.
Applications to refinance a mortgage increased 5% from the previous week but remained 57% below their level a year earlier. Applications for home purchases rose 8% for the week but were down 18% year over year.
“The declining trend in rates helped to spur stronger application activity, although the pace of purchase and refinance applications remain considerably lower than a year ago,” Joel Kan, MBA vice president and deputy chief economist, said, according to CNBC.
Some Applications See Increase
Kan said applications for conventional, Federal Housing Administration and Department of Veterans Affairs purchase loans all increased, with particularly strong gains in FHA and VA loans. He said the FHA mortgage rate had dropped below 7%, more than 20 basis points beneath the conforming-loan rate, helping some first-time buyers.
The share of applications for adjustable-rate mortgages declined slightly as rates eased. Those loans typically offer lower initial rates but expose borrowers to the possibility of higher payments later.
Tuesday’s rate increase could challenge the recent rebound in mortgage demand as buyers and homeowners weigh higher borrowing costs.
